New Member Promotion >>> Save $15 and get a SHRM tote!
Giving applicants with criminal backgrounds a fair chance at employment can be good for business.
Plus all the HR resources you need to be more efficient and effective this fall!
Apply for the SHRM Certification Exam and begin advancing your career.
Learn how to make the business case for diversity, October 25-27.
Short-term actions can have long-term consequences
The rising tide of employee benefits costs is forcing tough decisions to be made by executive teams, financial officers and HR, often reducing disposable income for employees to maintain benefit levels. This was one of the key findings of
Trends and Tradeoffs in Employee Medical Benefits, a survey by Corporate Synergies Group and the not-for-profit Financial Executive Research Foundation (FERF).
The survey of U.S. financial executives was conducted Feb. 25-May 31, 2011.
Decision-Making: HR and the Executive Team
Final benefits decisions are split almost evenly between HR and the executive team/board of directors. Among the companies surveyed, 48 percent said the final decision was made by the executive team or board of directors and 44 percent said it was made by HR. Senior financial executives are the final decision makers in 28 percent of companies. While 83 percent of respondents say that the final decisions have been made consistently by the same group at their organization, there does seem to be a slight shift to the executive team.
Of those who said that the decision maker had changed in the past three years, almost half (44 percent) responded that the medical benefits decision is now led by the executive team.
Increasingly, medical benefit decisions
are led by the executive team.
Despite the finance department’s role in employee benefits decisions, just 47 percent of financial executives said they are very informed about their various options and feel comfortable making the decisions.
“Employee benefits represent a major portion of total compensation costs—47 percent of companies said that providing employee medical benefits for the most recent fiscal year cost more than 10 percent of their total compensation costs,” said Tom Thompson, research associate with FERF and co-author of the report. “Yet, with less than half of financial executives saying that they are very informed about various benefits options and therefore comfortable making the decisions, it’s clear that the complexity of these decisions is weighing on the minds of senior financial executives,” he added.
Cutting Back to Save Costs
While 54 percent of senior financial executive respondents said that keeping their employees’ costs on medical employee benefits to a minimum was important, many companies are forced to act against this principle as the cost of medical coverage continues to rise. In the past five years:
Employers are “clearly faced with tough financial tradeoffs as they remain committed to offering medical coverage to their employees," said John Turner, president and CEO of Corporate Synergies Group, an employee benefits broker and consulting firm. "Yet in aggregate, these decisions—increased employee cost-sharing, higher deductible plans, reduced employee raises and bonuses—can mean significantly less disposable income for employees. Often these decisions are made in the short term by slightly tweaking plans year over year, but it’s important to look at the big picture and realistically consider, and communicate, the long-term implications to their employees,” Turner said.
Health Benefits Sacrosanct, for Now
There are some benefits items that most senior financial executives have not yet considered “on the table.” Only 9 percent have reduced non-medical benefits, and only 2 percent have eliminated dependent coverage. While voluntary benefits are catching on slowly, only 4 percent of those surveyed have shifted from employer-paid policies to voluntary policies for medical coverage and only 3 percent have shifted to voluntary policies for non-medical benefits.
HSAs and Cost-Reduction Programs
According to the study, 60 percent of companies have switched to higher deductible plans in the past two fiscal years, while 51 percent of businesses offer a health savings account (HSA) to their employees. Financial executives see a number of advantages in offering HSAs, most often citing the tax-deductible contributions (76 percent), allowing employees the flexibility to decide how to spend their medical dollars (62 percent), giving employees more control over individual health care decisions (60 percent) and the offsetting of high deductibles (58 percent). Among the companies that do not offer an HSA, 32 percent say that they need more education about the benefits of HSAs and 30 percent say that their employees need more education about the advantages of HSAs. Nine percent of financial executives that do not offer HSAs say that their employees think negatively about them.
“Despite the cost savings, many financial executives say that they believe their employees would not accept HSAs. Underscoring that concern, many companies that have offered the plans have seen fairly low enrollment rates. But this apprehension is keeping employers from reaping the myriad advantages of HSAs,” said Andrew Bloom, executive vice president of operations, at Corporate Synergies Group. “Therefore, both thoughtful communication and appropriate benefit structure are keys when it comes to the adoption of these programs. To fully embrace HSAs and high-deductible plans, employees need to know more about how the programs work and what costs they can expect, and the benefits need to be priced and configured attractively for employees’ adoption,” he stated.
Wellness Programs' Multi-Year ROI
Many companies are also turning to cost-reduction programs—65 percent have offered wellness programs, such as weight loss programs, smoking cessation programs, on-site gyms and/or nutritional seminars and services. Twenty-eight percent have offered disease management programs, and 15 percent have put a greater emphasis on claims profiling.
Nonetheless, 52 percent of financial executives have not seen a return on their investment (ROI) for these programs. Of the 35 percent of companies that have seen an ROI, 42 percent said that it took over two years to realize.
“As tempting as it is to look at current cost and one-year return on investment for employee benefit programs, the most effective way to manage benefits cost over time is through multiyear programs such as wellness and disease management, which typically require three or more years to deliver ROI,” says Michael Beauvais, director of worksite wellness for Corporate Synergies Group. “This requires financial executives to find a way to include some benefit cost-reduction programs as part of their multiyear projects.”
is an online editor/manager for SHRM.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 3,200 companies